Debt is crippling for millions of Americans, whether it is student loan debt, credit card debt, personal loans, or car debt. Many people are stuck paying the minimums on their own loans with no end in sight, or resort to bankruptcy to wipe the slate clean (almost) when it becomes impossibly burdensome. But before resorting to filing for bankruptcy, consider a few ways to manage your debt proactively that will help you take control of your finances and your future.
Managing your debt proactively involves getting educated on where you stand financially, making sacrifices, and working hard to get rid of this crushing burden that is keeping you from security and your dreams. Managing your debt and eventually ridding yourself of it forever are surefire ways that you can live your dreams and use your income the way you want to use it instead of making endless minimum payments each month.
To work on managing your debt proactively, get serious about controlling and paying off your debt, and pursue these six key steps…
1. Determine the Extent of Your Debt
It may sound simple, but before you can take any serious steps to manage your debt, you have to know how far in debt you are. Take as much time as you need to get exact numbers and interest rates. Write out ALL of your debts and who they are owed to, along with the interest rate, minimum payment, and due date during the month.
It also may help to educate yourself on how much interest each loan is accruing each month. This will reiterate to you how important it is that you manage and pay off debts as soon as possible so you’re not controlled by outrageous interest accumulating every month as you pay the minimum. Make sure you don’t miss any debts while you’re gathering all of this information.
2. Create a Detailed Monthly Budget
The second key is to know how much money you take home each month, and how much you need for expenses. Write out all of your monthly expenses and when they’re due, and then with any money left over, give it a precise job. Leaving extra money laying around is how a person spends irresponsibly, to begin with. Give each dollar a place to go — in this case, it will be going toward paying off debt.
3. Cut down your Lifestyle Significantly
Live within your means – these means don’t spend more than you can pay for. In other words, if you have to take a loan out on something, it means you can’t afford it. Completely eliminate any unnecessary extra activities or expenses like eating out, vacations, etc. and use that extra money to throw at your debt.
4. Make a Plan to Eliminate ALL of Your Debt
Whether it’s paying off the high-interest rates first or paying off debts smallest to largest (also called the debt snowball), come up with a plan to eliminate your debt and pay it off as fast as you can. The debt snowball is a favorite because it is encouraging to see the progress made as debts are paid off quickly. This will encourage you that you’re making headway and will help you stay focused on the goal.
5. Don’t Go into More Debt!
This one should be obvious but still needs to be said. Put a cap on your spending and DO NOT take out more loans as you’re trying to get out of debt.
6. Throw as Much Money as You Can at Your Debt Until It’s Gone
If you are able, pick up a side hustle to make a little more income to throw at debt. Sell things around your house. Zero in on managing your debt proactively and run toward that goal until you’re debt-free. The sooner you get out of debt, the faster you can use your income the way you want to, like saving and investing. Paying off debt can be a difficult and intimidating task, but there are many ways to make it possible. Stay focused and come up with a plan for managing and attacking debt, and don’t stop until you’re free of this burden. It’s possible, it just takes a lot of hard work and determination.
John J Scura III, Esq. Partner, Scura, Wigfield, Heyer, Stevens & Cammarota, LLP
John has been certified by The Supreme Court of New Jersey as a Civil Trial Attorney. Whether it is a personal injury case, bankruptcy case, litigation case or another type of matter, John wants his clients to participate in the decision making process toward solving their problem in the best way possible.